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Full text of "Arms export control act"

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[COMMITTEE PRINT] 



THE ARMS EXPORT CONTROL ACT 




AUGUST 23, 1970 



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Printed for the use of the Committee on International Relations 
of the House of Representatives 



74-774 



U.S. GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1976 






COMMITTEE ON INTERNATIONAL RELATIONS 



THOMAS E. MORGAN, 
CLEMENT J. ZABLOCKI, Wisconsin 
WAYNE L. HAYS, Ohio 
L. II. FOUNTAIN, North Carolina 
DANTE B. FASCELL, Florida 
CHARLES C. DIGGS, Jr., Michigan 
ROBERT N. C. NIX, Pennsylvania 
DONALD M. FRASER, Minnesota 
BENJAMIN S. ROSENTHAL, New York 
LEE II. HAMILTON, Indiana 
LESTER L. WOLFF, New York 
JONATHAN B. BINGHAM, New York 
GUS YATRON, Pennsylvania 
ROY A. TAYLOR, North Carolina 
MICHAEL HARRINGTON, Massachusetts 
LEO J. RYAN, California 
DONALD W. RIEGLE, Jr., Michigan 
CARDISS COLLINS, Illinois 
STEPHEN J. SOLARZ, New York 
HELEN S. MKV.NKR, New Jersey 
DON BONKER, Washington 
GERRY E. STUDDS, Massachusetts 



Pennsylvania, Chairman 

WILLIAM S. BROOMFIELD, Michigan 

EDWARD J. DERWINSKI, Illinois 

PAUL FINDLEY, Illinois 

JOHN H. BUCHANAN, Jr., Alabama 

J. HERBERT BURKE, Florida 

PIERRE S. dd PONT, Delaware 

CHARLES W. WHALEN, Jr., Ohio 

EDWARD G. BIESTER, Jr., Pennsylvania 

LARRY WINN, Jr., Kansas 

BENJAMIN A. OILMAN, New York 

TENNYSON GUYER, Ohio 

ROBERT J. LAGOMARSINO, California 



Marian A. Czarnecki, Chief of Staff 

(n> 



CONTENTS 



THE ARMS EXPORT CONTROL ACT 

Chapter 1 — Foreign and National Security Policy Objectives and Re- Page 

straints 1 

Section 1 — The Need for International Defense Cooperation and 

Military Export Controls 1 

Section 2 — Coordination With Foreign Policy 3 

Section 3 — Eligibility 3 

Section 4 — Purposes for Which Military Sales by the United States 

Are Authorized 5 

Section 5 — Prohibition Against Discrimination 

Chapter 2 — Foreign Military Sales Authorizations 7 

Section 21 — Sales From Stock 7 

Section 22 — Procurement for Cash Sales 10 

Section 23 — Credit Sales 10 

Section 24 — Guaranties 11 

Section 25 — Annual Estimate and Justification for Sales Program 11 

Chapter 3 — Military Export Controls 12 

Section 31 — Authorization and Aggregate Ceiling on Foreign Military 

Sales Credits 12 

Section 32 — Prohibition Against Certain Military Export Financing 

by Export-Import Bank 13 

Section 33 — Regional Ceilings on Foreign Military Sales 13 

Section 34 — Foreign Military Sales Credit Standards 13 

Section 35 — Foreign Military Sales to Less Developed Countries 13 

Section 36 — Reports on Commercial and Governmental Military Ex- 
ports ; Congressional Action 13 

Section 37 — Fiscal Provisions Relating to Foreign Military Sales 

Credits , 17 

Section 38 — Control of Arms Exports and Imports 17 

Section 39 — Fees of Military Sales Agents and Other Payments 19 

Chapter 4 — General, Administrative, and Miscellaneous Provisions 20 

Section 41— Effective Date 20 

Section 42 — General Provisions 20 

Section 43 — Administrative Expenses 21 

Section 44 — Statutory Construction 21 

Section 45 — Statutes Repealed and Amended 21 

Section 46 — Saving Provisions 22 

Section 47 — Definitions - 22 

(in) 



Digitized by the Internet Archive 
in 2013 



http://archive.org/details/armsexpoOOunit 



The Arms Export Control Act 

AN ACT To consolidate and revise foreign assistance legislation relating to reimbursable 

military exports 

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled, That this Act may 
be cited as "Arms Export Control Act". 

Chapter 1— FOREIGN AND NATIONAL SECURITY POLICY 
OBJECTIVES AND RESTRAINTS 

Sec. 1. The Xeed for International Defense Cooperation and 
Military Export Controls. — As declared by the Congress in the Arms 
Control and Disarmament Act, an ultimate goal of the United States 
continues to be a world which is free from the scourge of war and the 
dangers and burdens of armaments; in which the use of force has been 
subordinated to the rule of law; and in which international adjust- 
ments to a changing world are achieved peacefully. In furtherance of 
that goal, it remains the policy of the United States to encourage re- 
gional arms control and disarmament agreements and to discourage 
arms races. 

The Congress recognizes, however, that the United States and other 
free and independent countries continue to have valid requirements 
for effective and mutually beneficial defense relationships in order to 
maintain and foster the environment of international peace and secu- 
rity essential to social, economic, and political progress. Because of 
the growing cost and complexity of defense equipment, it is increas- 
ingly difficult and uneconomic for any country, particularly a develop- 
ing country, to fill all of its legitimate defense requirements from its 
own design and production base. The need for international defense 
cooperation among the United States and those friendly countries to 
which it is allied by mutual defense treaties is especially important, 
since the effectiveness of their armed forces to act in concert to deter 
or defeat aggression is directly related to the operational compati- 
bility of their defense equipment. 

Accordingly, it remains the policy of the United States to facilitate 
the common defense by entering into international arrangements with 
friendly countries which further the objective of applying agreed 
resources of each country to programs and projects of cooperative 
exchange of data, research, development, production, procurement, 
and logistics support to achieve specific national defense requirements 
and objectives of mutual concern. To this end, this Act authorizes sales 
by the United States Government to friendly countries having suffi- 
cient wealth to maintain and equip their own military forces at ade- 
quate strength, or to assume progressively larger shares of the costs 
thereof, without undue burden to their economies, in accordance with 

(1) 



the restraints and control measures specified herein and in furtherance 
of the security objectives of the United States and of the purposes and 
principles of the United Nations Charter. 

It is the sense of the Congress that all such sales be approved only 
when they are consistent with the foreign policy interests of the 
United States, the purposes of the foreign assistance program of the 
United States as embodied in the Foreign Assistance Act of 1961, as 
amended, the extent and character of the military requirement, and 
the economic and financial capability of the recipient country, with 
particular regard being given, where appropriate, to proper balance 
among such sales, grant military assistance, and economic assistance 
as well as to the impact of the sales on programs of social and eco- 
nomic development and on existing or incipient arms races. 

It is further the sense of Congress that sales and guaranties under 
sections 21. 22, 23, and 24. shall not be approved where they would 
haye the effect of arming military dictators who are denying the 
growth of fundamental rights or social progress to their own people: 
Provided^ That the President may waive this; limitation when he de- 
termines it would be important to the security of the United States, 
and promptly so reports to the Speaker of the House of Representa- 
tives and the ( Committee on Foreign Relations in the Senate. 

It shall be the policy of the United States to exert leadership in the 
world community to bring about arrangements for reducing the inter- 
national trade in implements of war and to lessen the danger of out- 
break of regional conflict and the burdens of armaments. United 
States programs for or procedures governing the export, sale, and 
grant of defense articles and defense services to foreign countries and 
international organizations shall be administered in a manner which 
will carry out this policy. 

It is the sense of the Congress that the President should seek to ini- 
tiate multilateral discussions for the purpose of reaching agreements 
among the principal arms suppliers and arms purchasers and other 
countries with respect to the control of the international trade in arma- 
ments. Tt is further the sense of Congress that the President should 
work actively with all nations to check and control the international 
sale and distribution of conventional weapons of death and dest ruc- 
tion and to encourage regional arms control arrangements. Tn further- 
ance of this policy, the President should undertake a concerted eiTort 
to convene an international conference of major arms-supplying and 
arms-purchasing nations which shall consider measures to limit con- 
ventional arms transfers in the interest of international peace and 
stability. 

It is the sense of the Congress that the aggregate value of defense 
art icles and defense services — 

(1) which are sold under section 21 or section 22 of (his Act ; 
or 

(2) which are licensed or approved for export under section 
01 this Act to, for the use. or for benefit of the armed forces, 

police, intelligence, or other internal security forces of a foreign 
countrjr or international organization under a commercial sales 
contract ; 
in anv fiscal year should not exceed current levels. 



Sec. 2. Coordination With Foreign Policy. — (a) Nothing con- 
tained in this Act shall be construed to infringe upon the powers or 
functions of the Secretary of State. 

(b) Under the direction of the President, the Secretary of State, 
taking into account other United States activities abroad, such as mili- 
tary assistance, economic assistance, and food for freedom, shall be 
responsible for the continuous supervision and general direction of 
sales and exports under this Act, including, but not limited to, deter- 
mining whether there shall be a sale to a country and the amount there- 
of, and whether there shall be delivery or other performance under 
such sale or export, to the end that sales and exports are integrated 
with other United States activities and the foreign polic}^ of the United 
States is best served thereby. 

(c) The President shall prescribe appropriate procedures to assure 
coordination among representatives of the United States Government 
in each country, under the leadership of the Chief of the United States 
Diplomatic Mission. The Chief of the diplomatic mission shall make 
sure that recommendations of such representatives pertaining to sales 
are coordinated with political and economic considerations, and his 
comments shall accompany such recommendations if he so desires. 

Sec. 3, Eligibility. — (a) Xo defense article or defense service shall 
be sold by the United States Government under this Act to any coun- 
try or international organization unless— 

(1) the President finds that the furnishing of defense articles 
and defense services to such country or international organiza- 
tion will strengthen the security of the United States and promote 
world peace ; 

(2) the country or international organization shall have agreed 
not to transfer title to. or possession of, any defense article or 
related training or other defense service so furnished to it to 
anyone not an officer, employee, or agent of that country or inter- 
national organization and not to use or permit the use of such 
article or related training or other defense service for purposes 
other than those for which furnished unless the consent of the 
President has first been obtained ; 

(3) the country or international organization shall have agreed 
that it will maintain the security of such article and will provide 
substantially the same degree of security protection afforded to 
such article by the United States Government ; and 

(4) the country or international organization is otherwise eli- 
gible to purchase defense articles or defense services. 

In considering a request for approval of any transfer of any weapon, 
weapons system, munitions, aircraft, military boat, military vessel. 
or other implement of war to another country, the President shall 
not give his consent under paragraph (2.) to the transfer unless the 
United States itself would transfer the defense article under considera- 
tion to that country. In addition, the President shall not give his 
consent under paragraph (#) to the transfer of any significant defense 
articles on the United States Munitions List unless the foreign country 
requesting consent to transfer agrees to demilitarize such defense 
articles prior to transfer, or the proposed recipient foreign country 
provides a commitment in writing to the United States Government 



that it will not transfer Mich defense articles, if not demilitarized, to 
any other foreign country or person without first obtaining the consent 
of the President. The President shall promptly submit a report to the 
Speaker of the House of Representatives and to the Committee oil 
Foreign Relations of the Senate on the implementation of each agree- 
ment entered into pursuant to clause (2) of this subsection. 

(b) No sales, credits, or guaranties shall be made or extended 
under this Act to any country during a period of one year after such 
country seizes, or takes into custody, or fines an American fishing ves- 
sel for engaging in fishing more than twelve miles from the coast of 
that country. The President may waive the provisions of this sub- 
section when he determines it to be important to the security of the 
United States or he receives reasonable assurances from the country 
involved that future violations will not occur, and promptly so reports 
to the Speaker of the House of Representatives and the Committee on 
Foreign Relations of the Senate. The provisions of this subsection 
shall not be applicable in any case governed by any international 
agreement to which the United States is a party. 

(c)(1) (A) No credits (including participations in credits) may be 
issued and no guaranties may be extended for any foreign country 
under this Act as hereinafter provided, if such country uses defense 
articles or defense services furnished under this Act, or any predeces- 
sor Act. in substantial violation (either in terms of quantities or in 
terms of the gravity of the consequences regardless of the quantities 
involved) of any agreement entered into pursuant to any such Act 
(i) by using such articles or services for a purpose not authorized 
under section 4 or. if such agreement provides that such articles or 
services may only be used for purposes more limited than those au- 
thorized under section 4 for a purpose not authorized under such 
agreement; (ii) by transferring such articles or services to, or per- 
mitting any use of such articles or services by, anyone not an officer, 
employee, or agent of the recipient country without the consent of the 
President; or (iii) by tailing to maintain the security of such articles 
or services. 

(B) Xo cash sales or deliveries pursuant to previous sales may be 
made, with respect to any foreign country under this Act as herein- 
after provided, if such country uses defense articles or defense serv- 
ices furnished under this Act. or any predecessor Act. in substantial 
violation (either in terms of quantity or in terms of the gravity of 
the consequences regardless of the quantities involved) of any agree- 
ment entered into pursuant to any such Act by using such articles or 
services for a purpose not authorized under section 4 or. if such agree- 
ment provides that such articles or services may only be used for pur- 
poses more limited than those authorized under section 1. for a pur- 
pose not authorized under such agreement. 

(2) The President shall report to the Congress promptly upon the 
receipt () f information thai a violation described in paragraph ( 1) of 
this subsection may have occurred. 

<•">)( A) A country shall be deemed to be ineligible under subpara- 
graph (A) of paragraph (1) of this subsection, or both subparagraphs 
(A) and (B) of such paragraph in the case of a violation described 



iii both such paragraphs, if the President so determines and so reports 
in writing to the Congress, or if the Congress so determines by joint 
resolution. . . 

(B) Notwithstanding a determination by the President of ineligi- 
bility under subparagraph (B) of paragraph (1) of this subsection, 
cash' sales and deliveries pursuant to previous sales may be made if the 
President certifies in writing to the Congress that a termination there- 
of would have significant adverse impact on United States security, 
unless the Congress adopts or has adopted a joint resolution pursuant 
to subparagraph (A) of this paragraph with respect to such 
ineligibility. 

(4) A country shall remain ineligible in accordance with paragraph 
(1) of this subsection until such time as — 

(A) the President determines that the violation has ceased: 
and 

(B) the country concerned has given assurances satisfactory to 
the President that such violation will not recur. 

(d) The President may not give his consent under paragraph (2) 
of subsection (a) or under the third sentence of such subsection to a 
transfer of a defense article, or related training or other defense serv- 
ice, sold under this Act and may not give his consent to such a transfer 
under section 505(a) (1) or 505(a) (4) of the Foreign Assistance Act 
of 1961 unless. 30 days prior to giving such consent, the President 
submits to the Speaker of the House of Representatives and the Com- 
mittee on Foreign Relations of the Senate a written certification with 
respect to such proposed transfer containing — 

(1) the name of the country or international organization pro- 
posing to make such transfer, 

(2) a description of the defense article or related training or 
other defense service proposed to be transferred, including the 
original acquisition cost of such defense article or related training 
or other defense service, 

(3) the name of the proposed recipient of such defense article 
or related training or other defense service, 

(4) the reasons for such proposed transfer, and 

(5) the date on which such transfer is proposed to be made. 
Any certification submitted to Congress pursuant to this subsection 
shall be unclassified, except that information regarding the dollar 
value and number of defense articles, or related training or other 
defense services, proposed to be transferred may be classified if public 
disclosure thereof would be clearly detrimental to the security of the 
United States. 

(e) If the President receives any information that a transfer of 
any -defense article, or related training or other defense service, has 
been made without his consent as required under this section or under 
section 505 of the Foreign Assistance Act of 1961, he shall report 
such information immediately to the Speaker of the House of Repre- 
sentatives and the Committee on Foreign Relations of the Senate. 

Sec. 4. Purposes fob Which Military Sales by the United States 
Are Authorized. — Defense articles and defense services shall be sold 
by t lie United States Government under this Act to friendly countries 



'4-774—76 2 



6 

■ 

solely for internal security, for legitimate self-defense, to permit the 
recipient country to participate in regional or collective arrangements 
or measures consistent vrith the Charter of the T nited Nations, or 
otherwise to permit the recipient country to participate in collective 
measures requested by the United Nations for the purpose of maintain- 
ing or restoring international peace and security, or for the purpose 
of enabling foreign military forces in less developed friendly countries 
to construct public Works and to engage' in other activities helpful to 
i he economic and sOcia] development of such friendly countries. It is 
the Muise of the Congress that such foreign military forces should not 
be maintained or established solely for civic action activities and that 
such civic action activities not significantly detract from the capability 
of the military forces to perform their military missions and be coordi- 
nated with and form part of the total economic and social development 
etfort: Pr&vided, That none of the funds contained in this authoriza- 
tion shall be used to guarantee, or extend credit, or participate in an 
extension of credit in connection with any sale of sophisticated weap- 
ons systems, such as missile systems and jet aircraft for military 
purposes, to any underdeveloped country other than Greece, Turkey, 
Iran, Israel, the Republic of China, the Philippines, and Korea unless 
the President determines that such fiharicing is important to the na- 
t ional security of the United States and reports within thirty days each 
such determination to the Congress. 

Sec. 5. Prohibition Aoaixst Discrimination'. — (a) It is the policy 
of the United States that no sales should be made, and no credits 
i including participations in credits) or guaranties extended to or for 
any foreign country, the laws, regulations, official policies, or govern- 
mental practices of which prevent any United States person (as de- 
lined in section 7701(a)(30) of the Internal Revenue Code of 1954) 
from participating in the furnishing of defense articles or defense 
services under this Act on the basis of race, religion, national origin, 
or ^ex. 

(b)(1) Xo agency performing functions under this Act shall, in 
employing or assigning personnel to participate in the performance 
of any such function, whether in the United States or abroad, take 
into account the exclusionary policies or practices of any foreign gov- 
ernment w here such polities or practices are based upon race, religion. 
national origin 1 , or sex. 

1^!) Each contract entered into by any such agency for the per- 
formance of any function under this Act -hall contain a provision to 
the effect that no person, partnership, corporation, or other entity 

performing function- pursuant to sflcii contract, shall, in employing 
or assigning personnel to participate in the performance of any such 
function, whether in the United States or abroad, take into account t he 
exclusionary policies ot practices of any foreign government where 

sudh policies or practices are based upon race, religion, nat ional origin, 
or BCX. 

i<) The President -hall promptly transmit reports to- the Speaker 
of the House of Representatives and the chairman of the Committee 
on Foreign Relations of the Senate concerning any instance in which 

any United State- per-on (a- defined in section 7701(a) (80) of the 

Infernal IvYvenne ( 'ode of \\K> I ) is prevent ed by a foreign <_ r <>vernment 

on the basis of race, religion, national origin, or sex, from pari icipat jng 



in the- performance of any sale or licensed transaction unaer iin.-> Act. 
Such reports shall include (1) a description of the facts and circum- 
stances of any such discrimination, (2) the response thereto on the 
part of the United States or any agency or employee thereof, and (3) 
the result of such response, if any. 

(d) (1) Upon the request of the Committee on Foreign Relations of 
the Senate or the ( "ommittee on International Relations of the House 
of Representatives, the President shall, within GO days after receipt 
of such request, transmit to both such committees a statement, prepared 
with the assistance of the Coordinator for Human Rights and Hu- 
manitarian Affairs, with respect to the country designated in such 
request, setting forth— 

(A) all the available information about the exclusionary 'pol- 
icies or practices of the government of such country when such 
policies or practices are based upon face, religion, national origin 
or sex and prevent any such person from participating in the 
performance of any sale or licensed transaction under this Act: 

(B) the response of the United States thereto and the results 
of such response : 

(C) whether, in the opinion of the President, notwithstanding 
any such policies or practices — 

(i) extraordinary circumstances exist which necessitate a 
continuation of such sale or licensed transaction, and. if so, 
a description of such circumstances and the extent to which 
such sale or licensed transaction should be continued (subject 
to such conditions as Congress may impose under this sec- 
tion), and 

(ii) on all the facts it is in the national interest of the 
United States to continue such sale or licensed transaction.; 
and 
(1>) such other information as such committee may request. 

(2) In the event a statement with respect to a sale or licensed 
transaction is requested pursuant to paragraph (1) of this subsection 
but is not transmitted in accordance therewith within 00 days after 
receipt of such request, such sale or licensed transaction shall be 
suspended unless and until such statement is transmitted. 

(3) (A) In the event a statement with respect to a sale or licensed 
transaction is transmitted under paragraph (1) of this subsection, the 
Congress may at any time thereafter adopt a joint resolution termi- 
nating or restricting such sale or licensed transaction. 

(B) Any such resolution shall be considered in the Senate in ac- 
cordance! with the provisions of section 601(b) of the International 
Security Assistance and Arms Export Contro] Act of 1976. 

(-C) The term "certification", as used in section 001 of such Act, 
means, for the purposes of this paragraph, a statement transmitted 
under paragraph (1) of this subsection. 

Chapter 2— FOREIGN MILITARY SALES AUTHORIZATIONS 

Sec. 21. Sales From Stocks.— (a) The President may sell defense 
articles and defense services from the stocks of the Department of 
Defense to any eligible country or international organization if such 
country or international organization agrees to pay in United States 
dollars — 



8 

(1) in the case of a defense article not intended to be replaced 
at the time such agreement is entered into, not less than the actual 
value thereof; 

(2) in the case of a defense article intended to be replaced 
at the time such agreement is entered into, the estimated cost of 
replacement of such article, including the contract or production 
costs less any depreciation in the value of such article: or 

(3) in the case of the sale of a defense service, the full cost 
to the United States Government of furnishing such service. 

(b) Except as provided by subsection (d) of this section, payment 
shall be made in advance or. if the President determines it to be in the 
national interest, upon delivery of the defense article or rendering of 
the defense service. 

(c) Personnel performing defense services sold under this Act 
may not perform any duties of a combatant nature, including any 
duties related to training, advising, or otherwise providing assistance 
regarding combat activities, outside the United States in connection 
with the performance of those defense services. 

(d) If the President determines it to be in the national interest 
pursuant to subsection (b) of this section, billings for sales made 
under letters of offer issued under this section after the enactment of 
tin- subsection may be dated and issued upon delivery of the defense 
article or rendering of the defense service and shall be due and payable 
upon receipt thereof by the purchasing country or international orga- 
nization. Interest shall be charged on any net amount due and payable 
which is not paid within sixty days after the date of such billing. The 
rate of interest charged shall be a rate not less than a rate determined 
by the Secretary of the Treasury taking into consideration the current 
average market yield on outstanding short-term obligations of the 
United States as of the last day of the month preceding the billing 
and shall be computed from the date of billing. The President may 
extend such sixty-day period to one hundred and twenty days if he 
determines that emergency requirements of the purchaser for acquisi- 
tion of such defense articles or defense services exceed the ready 
availability to the purchaser of funds sufficient to pay the United 
States in full for them within such sixty-day period and submits that 
determination to the Congress together with a special emergency 
request for the authorization and appropriation of additional funds to 
finance such purchases under this Act. 

(c)(1) After September 30, r.>7(>. letters of offer for the sale of 

defense articles or for the -ale of defense sen ices that are issued pur- 
suant to this section or pursuant to section 22 of thifi Act shall include 
appropriate charges for — 

(A) administrative services, calculated on an average per- 
centage basis to recover t he full estimated costs of administ rat ion 
of sales made under t his Act to all purchasers of such ait icles ami 

[♦vices; 

(B) any use of plant and production equipment iu connection 

with such defense articles; and 

((') a proportionate amount of any nonrecurring costs of re- 
search, development, and production of major defense equipment. 
(-1) The President may reduce or waive the charge or charges which 
would ot herwise be considered appropriate under paragraphs ( 1 ) (H) 



and (1) (C) for particular sales that would, if made, significantly ad- 
vance United States Government interests in North Atlantic Treaty 
Organization standardization, or foreign procurement in the United 
States under coproduction arrangements. 

(f ) Any contracts entered into between the United States and a for- 
eign country under the authority of this section or section 22 of this 
Act shall be prepared in a manner which will permit them to be made 
available for public inspection to the fullest extent possible consistent 
with the national security of the United States. 

(g) In carrying out section 814 of the Act of October 7, 1975 (Public 
Law 94-106), the President may enter into North Atlantic Treaty 
Organization standardization agreements for the cooperative furnish- 
ing of training on a bilateral or multilateral basis, if the financial 
principles of such agreements are based on reciprocity. Such agree- 
ments shall include reimbursement for all direct costs but may exclude 
reimbursement for indirect costs, administrative surcharges, and costs 
of billeting of trainees (except to the extent that members of the 
United States Armed Forces occupying comparable accommodations 
are charged for such accommodations by the United States). Each 
such agreement shall be transmitted promptly to the Speaker of the 
House of Representatives and the Committees on Appropriations, 
Armed Services, and Foreign Relations of the Senate. 

(h)(1) Sales of defense articles and defense services which could 
have significant adverse effect on the combat readiness of the Armed 
Forces of the United States shall be kept to an absolute minimum. 
The President shall transmit to the Speaker of the House of Repre- 
sentatives and the Committees on Armed Services and Foreign Rela- 
tions of the Senate on the same day a written statement giving a 
complete explanation with respect to any proposal to sell, under this 
section, any defense articles or defense services if such sale could have 
a significant adverse effect on the combat readiness of the Armed 
Forces of the United States. Each such statement shall be unclassified 
except to the extent that public disclosure of any item of information 
contained therein would be clearly detrimental to the security of the 
United States. Any necessarily classified information shall be con- 
fined to a supplemental report. Each such statement shall include an 
explanation relating to only one such proposal to sell and shall set 
forth— 

(A) the country or international organization to which the sale 
is proposed to be made ; 

(B) the amount of the proposed sale ; 

(C) a description of the defense article or service proposed to be 
sold ; 

(I)) a full description of the impact which the proposed sale 
will have on the Armed Forces of the United States; and 

(E) a justification for such proposed sale, including a certifica- 
tion that such sale is important to the securitv of the United 
States. 
A certification described in subparagraph (E) shall take effect on the 
date on which such certification is transmitted and shall remain in 
effect for not to exceed one year. 

(2) Xo delivery may be made under any sale which is required to 
be reported under paragraph (1) of this subsection unless the certifica- 



10 

tion required to l>e transmitted by paragraph (E) of paragraph (1) 
is in effect. 

Sec. 22. Pro cthement for Cash Sales. — (a) Except as otherwise 
provided in this section, the President may, without requirement for 
charge to any appropriation or contract authorization otherwise pro- 
vided, enter into contracts for the procurement of defense articles or 
defense services for sale for United States dollars to any foreign 
country or international organization if such country or inter- 
national organization provides the United States Government with 
a dependahle undertaking (1) to pay the full amount of such con- 
tract which will assure the United States Government against any 
loss on the contract, and (2) to make funds available in such amounts 
and at such times as may be required to meet the payments required 
by the contract and any damages and costs that may accrue from the 
cancellation of such contract, in advance of the time such payment.-, 
damages, or costs are due. Interest shall be charged on any net amount 
by which any such country or international organization is in arrears 
under all of its outstanding unliquidated dependable undertakings, 
considered collectively. The rate of interest charged shall be a rate not 
less than a rate determined by the Secretary of the Treasury taking 
into consideration the current average market yield on outstanding 
short-term obligations of the United States as of the last day of the 
month preceding the net arrearage and shall be computed from the 
date of net arrearage. 

(b) The President may. if he determines it to l>e in the national in- 
terest, issue letters of offer under this section which provide for billing 
upon delivery of the defense article or rendering of the defense serv- 
ice and for payment within one hundred and twenty days after the 
date of billing. This authority may be exercised, however, only if 
the President also determines that the emergency requirements of the 
purchaser for acquisition of such defense articles and services exceed 
the ready availability to the purchaser of funds sufficient to make pay- 
ments on a dependable undertaking basis and submits both determina- 
tions to the Congress together with a special emergency request for 
authorization and appropriation of additional funds to finance such 
purchases under this Act. Appropriations available to the Department 
of Defense may be used to meet the payments required by the con- 
tracts for the procurement of defense articles and defense services 
and shall be reimbursed by the amounts subsequently received from 
the country or Internationa] organization to whom articles or services 
are sold. 

Secj 28. Credit Sales.— The President is authorized to finance pro- 
curements of defense articles and defense services by friendly for- 
eign countries and International organizations on terms requiring the 
payment to the United States Government in United States dollars 
of— 

(1) the value of such articles Or service- within a period not 

to exceed twelve years after the deli very <>f such articles or the 

rendering of such services: and 

\) interest on the unpaid balance of that obligation for pay- 
ment of the value of such articles or son ices, .-it a rate equivalent 

to t he cm rent average interest rate, as of the last day of the month 



11 

preceding the financing of such procurement, that the United 
States Government pays on outstanding marketable obligations 
of comparable maturity, unless the President certifies to Congress 
that the national interest requires a lesser rate of interest and 
states in the certification the lesser rate so required and the justi- 
fication therefor. 
Sec. 24. Guarantees. — (a) The President may guarantee any indi- 
vidual, corporation, partnership, or other juridical entity doing busi- 
ness in the United States (excluding United States Government agen- 
cies other than the Federal Financing Bank) against political and 
credit risks of nonpayment arising out of their financing of credit sales 
of defense articles and defense services to f riendly countries and inter- 
national organizations. Fees shall be charged for such guaranties. 

(b) The President may sell to any individual, corporation, partner- 
ship, or other juridical entity (excluding United States Government 
agencies other than the Federal Financing Bank) promissory notes 
issued by friendly countries and international organizations as evi- 
dence of their obligations to make repayments to the United States 
on account of credit sales financed under section 23, and may guarantee 
payment thereof. 

(c) Funds made available to carry out this Act shall be obligated 
in an amount equal to 10 per centum of the principal amount of 
contractual liability related to any guaranty issued under this section, 
and all the funds so obligated shall constitute a single reserve for the 
payment of claims under such guaranties. Any funds so obligated 
which are deobligated from time to time during airy current fiscal 
year as being in excess of the amount necessary to maintain a frac- 
tional reserve of 10 per centum of the principal amount of contractual 
liability under outstanding guaranties shall be transferred to the 
general fund of the Treasury. Any guaranties issued hereunder shall 
be backed by the full faith and credit of the United States. 

Sec. 25. Annual Estimate and Justification for Sales Pro- 
gram. — (a) The President shall transmit to the Congress, as a part of 
the presentation materials for security assistance programs proposed 
for each fiscal year, a report which sets forth — 

(1) an estimate of the amount of sales expected to be made to 
each country under sections 21 and 22 of this Act, including a 
detailed explanation of the foreign policy and United States 
national security considerations involved in expected sales to each 
country : 

(2) an estimate of the amount of credits and guaranties ex- 
pected to be extended to each country under sections 23 and 24 

, of this Act ; 

(3) a list of all findings which are m effect on the date of such 
transmission made by the President pursuant to section 3(a) (1) 
of this Act, together with a full and complete justification for eacli 
such finding, explaining how sales to each country with respect 
to which such finding has been made will strengthen the security 
of the United States and promote world peace ; and 

(4) an arms control impact statement for each purchasing 
country, including (A) an analysis of the relationship between 
expected sales to each country and arms control efforts relating 



12 

to that country, and (B) the impact of such expected sales on the 
stability of the region that includes the purchasing country. 

(b) Not later than thirty days following the receipt of a request 
made by the Committee on Foreign Relations of the Senate or the 
( Ommittee on International Relations of the House of Representatives 
for additional information with respect to any estimate submitted 
pursuant to subsection (a), the President shall submit such informa- 
tion to such committee. 

(c) The President shall make every effort to submit all of the infor- 
mation required by this section wholly in unclassified form. In the 
event the President submits any such information in classified form. 
he shall submit such classified information in an addendum and shall 
also submit simultaneously a detailed summary, in unclassified form. 
of such classified information. 

Chapter 3— MILITARY EXPORT CONTROLS 

Sec. 31. Authorization- and Aggregate Ceilixg ox Foreign Mili- 
tary Sales Credits. — (a) There is hereby authorized to be appropri- 
ated to the President to carry out this Act not to exceed $1,039,000,000 
for the fiscal year 1976 and not to exceed $740,000,000 for the fiscal 
year 1977. Unobligated balances of funds made available pursuant to 
this section arc hereby authorized to be continued available by appro- 
priations legislation to carry out this Act. 

(b) The aggregate total of credits, or participations in credits, ex- 
tended pursuant to this Act and of the principal amount of loans 
guaranteed pursuant to section 24(a) shall not exceed $2,374,700,000 
for the fiscal year 1976. of which not less than $1,500,000,000 shall be 
available only for Israel, and shall not exceed $2,0*22,100,000 for the 
fiscal year 1977, of which not less than $1,000,000,000 shall be available 
only for Israel. 

(c) Funds made available for the fiscal years 1976 and 1977 under 
subsection (a) of this section shall be obligated to finance the pro- 
curement of defense articles and defense services by Israel on a long- 
term repayment basis either by the extension of credits, without regard 
to the limitations contained in section 23. or by the issuance of guar- 
antiee under section 24. Repayment shall be in not less than twenty 
years, following B grace period of ten years on repayment of prin- 
cipal. Israel shall be released from one-half of its contractual liability 
to repay the United States Government with respect to defense articles 
and defense services SO financed for each such year. 

(d) The aggregate acquisition cost to the United States of excess 
defense articles ordered by (he President in any fiscal year after fiscal 

year 1970 for delivery to foreign countries or international organiza- 
tions under the authority of chapter ^ of part II of the Foreign 
\ ' ! ' N ' "I" L961 Or pursuant t<> sales under this Act niav not 

d $100,000,000 (exclusive of -hips and their ond.oard stores and 
supplies transferred in accordance with law). 

SEC. 82, lY'ollII'.ITlox AOAFVST CERTAfN Mll.lTAKY E\PoKT V I \ \ \ < 

wo by Export-Import Bank. Notwithstanding any other provision 
of hiw. no funds or borrowing authority available to the Export-Im- 
port Bank of the United States shall be used by such Hank to partici- 
pate in any extension of credit in connection with any agreement to 



13 

sell defense articles and defense services entered into with any eco- 
nomically less developed country after June oO. Ub8. 

Sec 33. Regional Ceilings ox Foreign Military Sales.— (a) lie 
a"oregate of the total amount of military assistance pursuant to the 
Foreign Assistance Act of 1961, as amended, of credits or participa- 
tions in credits, financed pursuant to section 23 of the principal 
amount of loans guaranteed pursuant to section 24(a), shall, exclud- 
ing training, not exceed $40,000,000 in each fiscal year for African 

(b) The President may waive the limitations of this section when 
he determines it to be important to the security of the United States 
and promptly so reports to the Speaker of the House of Representa- 
tives and the' Committee on Foreign Relations of the Senate. 

(c) * * * [Repealed— 1973] . 

Sec. 34. Foreign Military Sales Credit Standards.— The Presi- 
dent shall establish standards and criteria for credit and guaranty 
transactions under sections 23 and 24 in accordance with the foreign, 
national security, and financial policies of the United States. 

Sec. 35. Foreign Military Sales to Less Developed Countries.— 
(a) When the President finds that any economically less developed 
country is diverting development assistance furnished pursuant to the 
Foreign Assistance Act of 1961, as amended, or sales under the Agri- 
cultural Trade Development and Assistance Act of 1954, as amended, 
to military expenditures, or is diverting its own resources to unneces- 
sary military expenditures, to a degree which materially interferes 
with its development, such country shall be immediately ineligible for 
further sales and guarantees under sections 21, 22, 23, and 24, until the 
President is assured that such diversion will no longer take place. 

(b) * * * [Repealed— 1974] 

Sec. 36. Reports on Commercial and Governmental Military 
Exports; Congressional Action. — (a) The President shall transmit 
to the Speaker of the House of Representatives and to the chairman of 
the Committee on Foreign Relations of the Senate not more than 
thirty days after the end of each quarter an unclassified report (except 
that any material which was transmitted in classified form under 
subsection (b)(1) or (c)(1) of this section may be contained in a 
classified addendum to such report, and any letter of offer referred to 
in paragraph (1) of this subsection may be listed in such addendum 
unless such letter of offer has been the subject of an unclassified cer- 
tification pursuant to subsection (b) (1) of this section) containing — 

(1) a listing of all letters of offer to sell any major defense 
equipment for $1,000,000 or more under this Act to each foreign 
country and international organization, bv category, if such letters 

' of offer have not been accepted or cancelled ; 

(2) a listing of all such letters of offer that have been accepted 
during the fiscal year in which such report is submitted, together 
with the total value of all defense articles and defense services sold 
to each foreign country and international organization during 
such fiscal year: 

(3) the cumulative dollar amounts, by foreign country and 
international organization, of sales credit agreements under sec- 
tion 23 and guaranty agreements under section 24 made during the 
fiscal year in which such report is submitted: 



14 

i 4) a numbered listing of all licenses and approvals for the 
export to each foreign country and international organization 
during such fiscal year of commercially sold major defense equip- 
ment, by category, sold for $1,000,000 or more, together with the 
total value of all defense articles and defense services so licensed 
for each foreign country and international organization, setting 
forth, with respect to the listed major defense equipment — 

(A) the items to be exported under the license. 

(B) the quantity and contract price of each such item to 
he furnished, and 

(C) the name and address of the ultimate user of each 
such item: 

(5) projections of the dollar amounts, by foreign country and 
international organization., of cash sales expected to be made 
under sections 21 and 22, credits to be extended under section 23, 
and guaranty agreements to be made under section 24 in the 
quarter of the fiscal year immediately following" the quarter for 
which Mich report is submitted: 

(6) a projection with respect to all cash sales expected to be 
made and credits expected to be extended to each country and 
organization for the remainder of the fiscal year in which such 
report is transmitted; 

( 7) an estimate of the number of officers and employees of the 
United States Government and of United States civilian contract 
personnel present in each such country at the end of that quarter 
for assignments in implementation of sales and commercial 
exports under this Act; 

(8) a description of each payment, contribution, gift, com- 
mission, or fee reported to the Secretary of State under section 39, 
including (A) the name of the person who made such payment, 
contribution, gift, commission, or fee; (B) the name of any sales 
agent or other person to whom such payment, contribution, gift, 
commission, or fee was paid; (C) the date and amount of such 

payment, contribution, gift, commission, or fee; (I)) a descrip- 
tion of the sale in connection with which such payment, contribu- 
tion, gift, commission, or fee was paid: and (E) the identification 
of any business information considered confidential by the person 
submitting it which is included in the report : and 

(9) an analysis and description of the services being per- 
formed by officers and employees of the United States Govern- 
ment under section 21(a) of this Act. including the number of 
personnel SO employed. 

For each letter of offer to sell under paragraphs (1) and (2), the 
report shall specify (i) the foreign country or international organiza- 
tion to which the defense article or service is offered or was sold, as the 
case may be ; i ii ) the dollar amount of I he offer to sell or the sale and 

the number of defense art icles offered or sold, as the case may be; (iii) 

a description of the defense article or service offered or sold, as the 

case may be: and (iv) the I nited States Armed Forces or other agency 
of the United States which is making the offer to -ell or the sale, as 
t he case may be. 

(b) (l) In the case of any letter of offer to sell any defense articles 

or Services under this Act for S-_\\000,000 or more, or any major 



15 

defense equipment for $7,000,000 or more, before such letter of offer 
is issued, the President shall submit to the Speaker of the House of 
Represenatives and to the chairman of the Committee on Foreign 
Eel at ions of the Senate a numbered certification with respect to such 
offer to sell containing the information specified in clauses (i) through 
(iv) of subsection (a) and a description, containing the information 
specified in paragraph (8) of subsection (a), of any contribution, 
gift, commission, or fee paid or offered or agreed to be paid in 
order to solicit, promote, or otherwise to secure such letter of offer. 
In addition, the President shall, upon the request of such committee 
or the Committee on International Relations of the House of Repre- 
sentatives, transmit promptly to both such committees a statement 
setting forth, to the extent specified in such request — 

(A) a detailed description of the defense articles or services 
to be offered, including a brief description of the capabilities of 
any defense article to be offered : 

(B) an estimate of the number of officers and employees of 
the United States Government and of United States civilian con- 
tract personnel expected to be needed in such country to carry 
out the proposed sale ; 

(C) the name of each contractor expected to provide the 
defense article or defense service proposed to be sold (if known 
on the date of transmittal of such statement) ; 

(D) an analysis of the arms control impact pertinent to such 
offer to sell, prepared in consultation with the Secretary of 
Defense : 

(E) the reasons why the foreign country or intern ational 
organization to which the sale is proposed to be made needs the 
defense articles or seiwices which are the subject of such sale and 
a description of how such country or organization intends to use 
such defense articles or services ; 

(F) an analysis by the President of the impact of the proposed 
sale on the military stocks and the military preparedness of the 
United States ; 

(G) the reasons why the proposed sale is in the national 
interest of the United States; 

(H) an analysis by the President of the impact of the pro- 
posed sale on the military capabilities of the foreign country 
or international organization to which such sale would be made ; 

(I) an analysis by the President of how the proposed sale 
would affect the relative military strengths of countries in the 
region to which the defense articles or services which are the 
subject of such sale would be delivered and whether other coun- 
tries in the region have comparable kinds and amounts of defense 
articles or services ; 

(J) an estimate of the levels of trained personnel and main- 
tenance facilities of the foreign country or international orga- 
nization to which the sale would be made which are needed and 
available to utilize effectively the defense articles or services 
proposed to be sold ; 

(K) an analysis of the extent to which comparable kinds and 
amounts of defense articles or services are available from other 
countries : 



16 

(L) an analysis of the impact of the proposed sale on United 
States relations with the countries in the region to which the 
defense articles or services which are the subject of such sale 
would be delivered ; and 

(M) a detailed description of any agreement proposed to bo 
entered into by the United States for the purchase or acquisition 
by the United States of defense articles, services, or equipment, 
or other articles, services, or equipment of the foreign country or 
international organization in connection with, or as considera- 
tion for, such letter of offer, including an analysis of the impact of 
such proposed agreement upon United States business concerns 
which might otherwise have provided such articles, services, or 
equipment to the United States, an estimate of the costs to be 
incurred by the United States in connection with such agreement 
compared with costs which would otherwise have been incurred, 
an estimate of the economic impact and unemployment which 
would result from entering into such proposed agreement, and 
an analysis of whether such costs and such domestic economic 
impact justify entering into such proposed agreement. 
A cert i Heat ion transmitted pursuant to this subsection shall be un- 
classified, except that the information specified in clause (ii) and the 
details of the description specified in clause (iii) of subsection (a) 
may be classified if the public disclosure thereof would be clearly 
detrimental to the security of the United States. The letter of offer 
shall not be issued if the Congress, within thirty calendar days after 
receiving suc ]i certification, adopts a concurrent resolution stating 
that it objects to the proposed sale, Unless the President states in his 
certification that an emergency exist s which requires such sale in the 
national security interests of the United States. 

(2) Any such resolution shall be considered in the Senate in ac- 
cordance with the provisions of section 601(b) of the International 
Security Assistance and Arm- Export Control Act of 1970. 

(3) For the purpose of expediting the consideration and adoption 
of concurrent resolutions under this subsection, a motion to proceed 
to the consideration of any such resolution after it has been reported 
by the appropriate committee shall be treated as highly privileged 
in the House of Represent at i ves. 

(c) In the case of an application by a person (other than with re- 
gard to a sale under section 21 or section 22 of this Act) for a license 

for the export of any major defense equipment sold under a contract 

; n the amount of $7,000,000 or more or of defense articles or defense 
services sold under a contract in the amount of $25,000,000 or more, 
not less than 30 days before issuing such license the President shall 

transmit to the Speaker of the House of Representatives and to the 
chairman of the Committee on Foreign Relations of the Senate an 
unclassified numbered certification with reaped to such application 
specifying (1) the foreign country or international organization to 

which SUCh export will be made. (2) the dollar amount of the 
items to be exported, and ( :'» ) a description of the items to be ex- 
po it c< I. In addition, the President shall, upon the request of such com- 
mittee or the Committee on International Relations of \}\i> House of 



17 

Representatives, transmit promptly to both such committees a state- 
ment setting forth, to the extent specified in such request, a description 
of the capabilities of the items to be exported, an estimate of the total 
number of United States personnel expected to be needed in the foreign 
country concerned in connection with the items to be exported and 
an analysis of the arms control impact pertinent to such application, 
prepared in consultation with the Secretary of Defense. A certifica- 
tion transmitted pursuant to this subsection shall be unclassified, 
except that the information specified in paragraph (2) and the details 
of the description specified in paragraph (3) may be classified if the 
public disclosure thereof would be clearly detrimental to the security 
of the United States. 

(d) In the case of an approval under section 38 of this Act of a 
United States commercial technical assistance or manufacturing licens- 
ing agreement for or in a country not a member of the North Atlantic 
Treat}- Organization which involves the manufacture abroad of any 
item of significant combat equipment on the United States Munitions 
List, before such approval is given, the President shall submit a certifi- 
cation with respect to such proposed commercial agreement in a man- 
ner similar to the certification required under subsection (c) containing 
comparable information, except that the last sentence of such sub- 
section shall not apply to certifications submitted pursuant to this 
subsection. 

Sec. 37. Fiscal Provisions Relating to Foreign Military Sales 
Credits. — (a) Cash payments received under sections 21 and 22 and 
advances received under section 23 shall be available solely for pay- 
ments to suppliers (including the military departments) and refunds 
to purchasers and shall not be available for financing credits and 
guaranties. 

(b) Amounts received from foreign governments and international 
organizations as repayments for credits extended pursuant to section 
23, amounts received from the disposition of instruments evidencing 
indebtedness under section 24(b) (excluding such portion of the sales 
proceeds as may be required at the time of disposition to be obligated 
as a reserve for payment of claims under guaranties issued pursuant 
to section 24(b), which sums are made available for such obliga- 
tions), and other collections (including fees and interest) shall be 
transferred to the miscellaneous receipts of the Treasury. 

Sec. 38. Control of Arms Fxports and Imports. — (a)(1) In fur- 
therance of world peace and the security and foreign policy of the 
United States, the President is authorized to control the import and 
the export of defense articles and defense services and to provide for- 
eign policy guidance to persons of the United States involved in the 
export and import of such articles and services. The President is 
authorized to designate those items which shall be considered as de- 
fense articles and defense services for the purposes of this section 
and to promulgate regulations f or the import and export of such 
articles and services. The items so designated shall constitute the 
United States Munitions List. 

(2) Decisions on issuing export licenses under this section shall be 
made in coordination with the Director of the United States Arms 



is 

Control and Disarmament Agency and shall take into account the 
Director's opinion as to whether the export of an article willcontribute 
to an arms race, increase the possibility of outbreak or escalation of 
conflict, or prejudice the development of bilateral or multilateral arms 
control arrangements, 

(b)(1) As prescribed in regulations issued under this section, every 
person (other than an officer or employee of the United States Gov- 
ernment acting in an official capacity) who engages in the business 
of manufacturing, exporting, or importing any defense articles or 
defense services designated by the President under subsection (a) 
( 1 ) shall register with the United States Government agency charged 
with the administration of this section, and shall pay a registration 
fee which shall be prescribed by such regulations. Such regulations 
shall prohibit the return to the United States for sale in the United 
State- (other than for the Armed Forces of the United States and its 
allies or for any State or local law enforcement agency) of any mili- 
tary firearms or ammunition of United States manufacture furnished 
to foreign governments by the United States under this Act or any 
other foreign assistance or sales program of the United States. 
whether or not enhanced in value or improved in condition in a foreign 
country. This prohibition shall not extend to similar firearms that 
have been so substantially transformed as to become, in effect, articles 
of foreign manufacture. 

(2) Except as otherwise specifically provided in regulations issued 
under subsection (a) (1), no defense articles or defense services desig- 
nated by the President under subsection (a) (1) may be exported or 
imported without a license for such export or import, issued in accord- 
ance with this Act and regulations issued under this Act. except that 
no license shall be required for exports or imports made by or for an 
agency of the United States Government (A) for official use by a 
department or agency of the United States Government, or (B) for 
carrying out any foreign assistance pr sales program authorized by 
law and subject to the control of the President by other mean-. 

(3) Xo license may be issued under this Act for the export of any 
major defense equipment sold under a contract in the amount of 
£25,000.000 or more to any foreign country which is not a member of 
the North Atlantic Treaty Organization unless such major defense 
equipment was sold under this Act. 

(c) Any person who willfully violates any provision of this section 
or section 89, or any rule or regulation issued under either section, or 
who willfully, in a registration or license application or required 
report, makes any untrue statement of a material fact pr omits to 
state a materia] fact required to be stated therein or necessary to make 
the statements therein not misleading, shall upon conviction be fined 
not more than S100.000 or imprisoned not more than two years, or 
both. 

Cd) This section applies to and within the Canal Zone. 

(e) Tn carrying out functions under this section with respect to 
the export of defense articles and defense services, the President is 

authorized to exercise the same powers concerning violations and 

enforcement which are conferred upon departments, agencies and 



19 

officials by sections 6 (c), (d), (e), and (f) and 7 (a) and (c) of 
the Export Administration Act of 1969. subject to the same terms 
and conditions as are applicable to such powers under such Act. 
Nothing in this subsection shall be construed as authorizing the with- 
holding of information from the Congress. 

Sec. 39. Fees of Military Sales Agents and Other Pay- 
ments. — (a) In accordance with such regulations as he may prescribe, 
the Secretary of State shall require adequate and timely reporting on 
political contributions, gifts, commissions and fees paid, or offered or 
agreed to be paid, by any person in connection with — 

(1) sales of defense articles or defense services under section 
22 of this Act ; or 

(2) commercial sales of defense articles or defense services 
licensed or approved under section 38 of this Act : 

to or for the armed forces of a foreign country or international orga- 
nization in order to solicit, promote, or otherwise to secure the con- 
clusion of such sales. Such regulations shall specify the amounts and 
the kinds of payments, offers, and agreements to be reported, and the 
form and timing of reports, and shall require reports on the names of 
sales agents and other persons receiving such payments. The Secretary 
of State shall by regulation require such recordkeeping as he deter- 
mines is necessary. 

(b) The President may, by regulation, prohibit, limit, or prescribe 
conditions with respect to such contributions, gifts, commissions, and 
fees as he determines will be in furtherance of the purposes of this 
Act. 

(c) No such contribution, gift, commission, or fee may be included, 
in whole or in part, in the amount paid under any procurement con- 
tract entered into under section 22 of this Act, unless the amount 
thereof is reasonable, allocable to such contract, and not made to a 
person who has solicited, promoted, or otherwise secured such sale, or 
has held himself out as being able to do so, through improper influence. 
For the purposes of this section, "improper influence*' means influence, 
direct or indirect, which induces or attempts to induce consideration 
or action by any employee or officer of a purchasing foreign govern- 
ment or international organization with respect to such purchase on 
any basis other than such consideration of merit as are involved in 
comparable United States procurements. 

(d) (1) All information reported to the Secretary of State and all 
records maintained by any person pursuant to regulations prescribed 
under this section shall be available, upon request, to any standing com- 
mittee of the Congress or any subcommittee thereof and to any agency 
of the United States Government authorized by law to have access to 
the books and records of the person required to submit reports or to 
maintain records under this section. 

(2) Access by an agency of the United States Government to 
records maintained under this section shall be on the same terms and 
conditions which govern the access by such agency to the books and 
records of the person concerned. 



20 

Chapter 4— GENERAL, ADMINISTRATIVE, AND 
MISCELLANEOUS PROVISIONS 

Sue. 41. Effective Date. — This Act shall take effect on July 1, 1968. 

Sec. 42. General Provisions. — (a) In carrying out this Act. 
special emphasis shall be placed on procurement in the United States. 
hut. subject to the provisions of subsection (b) of this section, consider- 
ation shall also be given to coproduction or licensed production out- 
side the United States of defense articles of United States origin when 
such production best serves the foreign policy, national security, and 
economy of the United States. In evaluating any sale proposed to be 
made pursuant to this Act. there shall be taken into consideration (1) 
tlic extent to which the proposed sale damages or infringes upon licens- 
ing arrangements whereby United States entities have granted licenses 
for the manufacture of the defense articles selected by the purchasing 
country to entities located in friendly foreign countries, which licenses 
result in financial returns to the United States, (2) the portion of 
the defense articles so manufactured which is of United States origin, 
and (3) in coordination with the Director of the United States Arm- 
Control and Disarmament Agency, the Director's opinion as to the 
extent to which such sale might contribute to an arms race, or increase 
the possibility of outbreak or escalation of conflict, or prejudice the 
development of bilateral or multilateral arms control arrangement-. 

(b) No credit sale shall be extended under section 23, and no guar- 
antee shall be issued under section 24, in any case involving copro- 
duction or licensed, production outside the United States of any de- 
fense article of United States origin unless the Secretary of State shall, 
in advance of any such transaction, advise the appropriate commit- 
tee- of the Congress and furnish the Speaker of the House of Repre- 
sentatives and the President of the Senate with full information re- 
garding the proposed transaction, including, but not limited to, a 
description of the particular defense article or articles which would be 
produced under license or coproduced outside the United States, the 
estimated value of such production or coproduction, and the probable 
impact of the proposed transaction on employment and production 
witli in the United States. 

(c) Funds made available under this Act may be used for procure- 
ment outside the United States only if the President determines that 
such procurement will not result in adverse effects upon the economy 
of the United States or the industrial mobilization base, with special 
reference to any areas of labor surplus or to the net position of the 
United State- in its balance of payments with the rest of the world, 

which outweigh the economic or other advantages to t lie United States 
of less costly procurement outside the United States. 

(d)0 ) With resped to sales and guaranties under sections 21. 22, 
23, and 24, the Secretary of Defense shall, under the direction of the 
President, hare primary responsibilij y for — 

I A ) the determination of military end item requirements; 
(M) the procurement of military equipment in a manner which 
permit- its integration with service programs; 



21 

(C) the supervision of the training of foreign military 
personnel ; 

(D) the movement and delivery of military end-items; and 

(E) within the Department of Defense, the performance of 
any other functions with respect to sales and guaranties. 

(2) The establishment of priorities in the procurement, delivery, 
and allocation of military equipment shall, under the direction of the 
President, be determined by the Secretary of Defense. 

(e) (1) Each contract for sale entered into under sections 21 and 
22 of this Act shall provide that such contract may be canceled in whole 
or in part, or its execution suspended, by the United States at any 
time under unusual or compelling circumstances if the national interest 
so requires. 

(2) (A) Each export license issued under section 38 of this Act 
shall provide that such license may be revoked, suspended, or amended 
by the Secretary of State, without prior notice, whenever the Secre- 
tary deems such action to be advisable. 

(B) Nothing in this paragraph may be construed as limiting the 
regulatory authority of the President under this Act. 

(3) There are authorized to be appropriated from time to time such 
sums as may be necessary (A) to refund moneys received from pur- 
chasers under contracts of sale entered into under sections 21 and 22 
of this Act that are canceled or suspended under this subsection to the 
extent such moneys have previously been disbursed to private con- 
tractors and United States Government agencies for work in progress, 
and (B) to pay such damages and costs that accrue from the corre- 
sponding cancellation or suspension of the existing procurement con- 
tracts or United States Government agency work orders involved. 

(f) The President shall, to the maximum extent possible and con- 
sistent with the purposes of this Act, use civilian contract personnel 
in any foreign country to perform defense services sold under this 
Act. 

Sec. 43. Aomixistrative Expexses. — (a) Funds made available 
under other law for the operations of United States Government agen- 
cies carrying out functions under this Act shall be available for the 
administrative expenses incurred by such agencies under this Act. 

(b) Administrative expenses incurred by any department or agency 
of the United States Government (including any mission or group) in 
carrying out functions under this Act which are primarily for the 
benefit of any foreign country shall be fully reimbursed from amounts 
received for sales under sections 21 and 22. 

Sec. 44. Statutory Construction. — Xo provision of this Act shall 
be construed as modifying in any way the provisions of the Atomic 
Energy Act of 1054. as amended, or section 7307 of title 10 of the 
United States Code. 

Sec. 45. Statutes Repealed axd Amended. — (a) Sections 521, 522, 
523, 524(b)(3), 525, 634(g). and 640 of the Foreign Assistance Act 
of 1061. as amended, are hereby repealed. 

(b) Part TIT of the Foreign Assistance Act of 1061, as amended, is 
amended as follows : 

(1) Section 622(b) is amended by striking out "or sale-". 



22 

(2) Section 6*2*2 (c) is amended by striking out ''and sales v and 
"or sales''. 

(3) Section 632(d) is amended by striking out "sections 506, 
522, and 523." in the first sentence and inserting in lieu thereof 
''section 506". 

(4) Section 634(d) is amended by inserting "or any other" be- 
tween "under this" and "Act" in the fourth sentence. 

I 5 ) Section 644 (m) is amended by striking out "and sales" in 
the first sentence of the paragraph following numbered para- 
graph ('3). 

(c) References in law to the provisions of law repealed by subsec- 
tion (a) of this section shall hereafter be deemed to be references to 
tl>is Act or appropriate provisions of this Act. Except for the laws 
specified in section 44, no other provision of law shall be deemed to 
apply to this Act unless it refers specifically to this Act or refers gen- 
erally to .-ales of defense articles and defense services under any Act. 

Sec. 46. Saving Provisions. — Except as may be expressly provided 
to the contrary in this Act. all determinations, authorizations, regula- 
tions, orders, contracts, agreements, and other actions issued, under- 
taken, or entered into under authority of any provision of law repealed 
by section 45(a) shall continue in full force and effect until modified 
by appropriate authority. 

Sec 47. Definitions. — For purposes of this Act, the term — 

(1) "excess defense article" has the meaning provided by section 
6 14(g) of the Foreign Assistance Act of 1961 : 

(2) "value" means, in the case of an excess defense article, not less 
than the greater of — 

(A) the gross cost incurred by the United States Government 
in repairing, rehabilitating, or modifying such article, plus the 
scrap value: or 

( H ) the market value, if ascertainable ; 
(3) "defense article"', except as provided in paragraph (7) of this 
section, includes — 

(A) any weapon, weapons system, munition, aircraft, vessel, 
boat, or other implement of war, 

(B) any property, installation, commodity, material, equip- 
ment, supply, or goods used for the purposes of making military 
sales, 

(C) any machinery, facility, look material, supply, or other 
item necessary for (he manufacture, production, processing, re- 
pair, servicing, storage, construction, < rahstibrtal ion, operation, or 
use of any article listed in this paragraph, and 

(D) any component or part of any article listed in this 
paragraph, 

but doc- include merchant vessels or (as defined by the Atomic 
Energy Act of L954) source material, byproduct material, special 
nuclear material, production facilities, utilization facilities, or atomic 
weapons or art i^les, involving Restricted Data : 

( I ) "defense serVicfe' 1 , except as provided in paragraph (7) of this 
cction. includes any service, test, inspection, repair, trainjna publica- 
tion, technical or other assistance, oi- defense information (as defined 
in section r >ll(V) of the Foreign Assistance A.ct of 1961 ) , used for the 
purposes of making military sales; 



23 

(5) "training" includes formal or informal instruction of foreign 
students in the United States or overseas by officers or employees of 
the United States, contract technicians, or contractors (including 
instruction at civilian institutions), or by correspondence courses, 
technical, educational, or information publications and media of all 
kinds, training aid, orientation, training exercise, and military advice 
to foreign military units and forces; 

(6) ''major defense equipment" means any item of significant com- 
bat equipment on the United States Munitions List having a non- 
recurring research and development cost of more than $50,000,000 or a 
total production cost of more than $200,000,000; and 

(7) "defense articles and defense services" means, with respect to 
commercial exports subject to the provisions of section 38 of this Act. 
those items designated by the President pursuant to subsection (a)(1) 
of such section. 

o 



UNIVERSITY OF FLORIDA 



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